Capital Goods

THE BE YOUR OWN ECONOMIST ® BLOG Yesterday’s Census Bureau report on orders and shipments of durable goods(http://www.census.gov/indicator/www/m3/adv/pdf/durgd.pdf) confirmed, once again, that new orders for business equipment are flat and have been flat for some time. Here are the most recent numbers: April = $74.4 billionMarch = $75.4 billionFebruary = $74.4 billion The following chart confirms that new orders have stalled, fluctuating in a range, for about two years. New Orders for Nondefense Capital Goods (Click on chart to enlarge) Recessions shaded That’s troubling for two reasons. First, it seems that the expansion is over. This series is a leading Continue reading

Housing and Autos

THE BE YOUR OWN ECONOMIST ® BLOG In the last two days The New York Times published analytical articles on housing and autos that speak poorly for the economy’s outlook. Today’s edition carried a story by Vikas Bajaj (http://www.nytimes.com/2008/05/28/business/28housing.html?_r=1&ref=todayspaper&oref=slogin) that began: “America’s home-buying season, when for-sale signs sprout like dandelions, is shaping up to be even worse than expected this year, with prices falling, sales slowing and few signs of a turnaround emerging………… And went on to say: “While Wall Street is growing hopeful that the economy may dodge a recession, many economists warn that the pain in the housing Continue reading

Consumer Confidence Heading South

THE BE YOUR OWN ECONOMIST ® BLOG This morning The Conference Board reported (http://www.conference-board.org/economics/ConsumerConfidence.cfm) that consumer confidence had plunged to 57.2 If you update the chart with that number, you can see that consumer confidence has fallen to its lowest level since the aftermath of the 1990-91 recession. If it falls more than another ten points, we’ll be below any of the troughs recorded in the chart. Consumer Confidence (Click on chart to enlarge) Recessions shaded In the bulletin that accompanied The Conference Board’s announcement, Lynn Franco, Director of the Board’s Consumer Research Center said: “….Weakening business and job conditions Continue reading

That Was The Week That Was

THE BE YOUR OWN ECONOMIST ® BLOG “That Was The Week That Was” was the title of a television program many years ago. This was a week that many investors would like to forget. What happened to the stock-market rally? Did it fade together with hopes of a second-half economic rebound? Consider the following chart. The Stock Market, Earnings Per Share and Price/Earnings Ratio (Click on chart to enlarge)Recessions shaded The stock market (S&P) peaked at roughly the same level in 2007 as it had in 2000, but earnings per share (EPS) improved by more than half in those years. Continue reading

The Industrial Sector

THE BE YOUR OWN ECONOMIST ® BLOG Today the Office of Federal Housing Enterprise Oversight issued a press release (http://www.ofheo.gov/media/pdf/4q07hpi.pdf) that began: “U.S. home prices fell in the first quarter of 2008 …… This decline…… is the largest quarterly price decline on record. Over the past year …….. This is the largest decline in the purchase only index’s 17-year history.” Housing and financial markets have captured most of our attention lately. What about the industrial economy? Residential construction affects it. Lumber and other building materials, furnaces, air conditioners and water heaters, kitchen and laundry appliance, carpets, furniture and furnishings are Continue reading

The Fed’s Forecast

THE BE YOUR OWN ECONOMIST ® BLOG The Federal Reserve today released the April 29-30 meeting minutes of its Federal Open Market Committee (http://www.federalreserve.gov/monetarypolicy/fomcminutes20080430.htm) , which sets the federal-funds rate at which banks lend reserves to one another. The Fed also released the forecast that accompanied the meeting. That was enough to clinch a brutal day on Wall Street. Begin with the Fed’s synopsis of current conditions: “The information reviewed at the April meeting, which included the advance data on the national income and product accounts for the first quarter, indicated that economic growth had remained weak so far this Continue reading

Profits & Profit Margins

THE BE YOUR OWN ECONOMIST ® BLOG The stock market’s performance has generated some enthusiasm lately. Is the bad patch over? Business earnings can provide a clue. The following chart illustrates after-tax corporate profits throughout the economy. The huge increase since the 2001 recession inspired the stock-market gains that followed that slump. No other decade provided comparable performance. But earnings in 2007’s last quarter were only $1,425 billion, marking 2007 as a year of little gain. (Update the following chart using that figure.) If profit growth has stalled, the stock market won’t continue to rise. After-Tax Corporate Profits (Click on Continue reading

This Month’s Indicators

THE BE YOUR OWN ECONOMIST ® BLOG The Conference Board announced today (http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1) that its Index of Leading Economic Indicators advanced slightly in April after rising somewhat in March. The index remains down for the past six months and full year. The chart below reveals that the leading indicators have stalled, showing no gain for some time. Leading Indicators (Click on chart to enlarge) Recessions shaded Does the recent uptick mean that the worst is over? Have we rounded the corner? Do we see the light at the end of the tunnel? Probably not. Consider housing starts: Construction on 692,000 Continue reading

Half Full? Half Empty?

THE BE YOUR OWN ECONOMIST ® BLOG Yesterday’s Wall Street Journal (http://online.wsj.com/article/SB121068163716188223.html) and New York Times (http://www.nytimes.com/2008/05/14/business/14leonhardt.html?_r=1&scp=2&sq=David+Leonhardt&st=nyt&oref=slogin) carried stories that questioned whether we’re in recession and whether recession is likely. The Wall Street Journal article by Kelly Evans and Justin Lahart began: “A funny thing happened to the economy on its way to recession: It’s taken a detour. “That, at least, is the view of a growing number of economists — including some who not long ago were saying a recession was all but inevitable. They note that stock and credit markets have steadily improved since the Federal Reserve intervened Continue reading